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Errors & Omissions Insurance protects owners of IT businesses, freelancers, and
independent contractors in tech fields from the potentially massive costs of lawsuits
claiming that their work caused financial losses for a client.
As an IT professional, you're among
the people who are most vulnerable to E&O lawsuits for two reasons:
Errors and Omissions Insurance (also called Professional Liability Insurance)
is a type of coverage that lets you operate your business without worrying that
an unexpected lawsuit will force you to drain your business or personal assets.
E & O coverage kicks in when a client claims that work you're responsible for (such
as programming, software installation, networking, etc.) includes mistakes or oversights
that caused them a direct financial loss.
Your E&O policy will offer payment to cover certain specific expenses associated
with defending yourself against a lawsuit, including:
The kind of work you do and the type of clients you serve are two major factors
that affect how high your Errors and Omissions policy limit should be. If you work
with larger companies, it's usually a good idea to have a higher E&O limit. Why?
Because a single mistake that prevents a large company from operating (even for
a day) could cause a much greater financial loss than one that prevents a sole proprietor
Even if you're careful in all your work, you have great relationships with all your
clients, and you've never been sued in the past, it's still a wise idea to invest
in an E and O policy to protect your IT company.
Why? Imagine this scenario: you're an independent contractor and you're working
on a project for a larger IT company. One of this company's clients is a multi-billion-dollar
retailer. The project you're helping with involves updating the company's email
system – pretty straightforward stuff. You do your work, the project ends, and everything's
But three months later, the company's email is invaded by a virus that compromises
almost all the customer data the company holds. The company looks terrible and shoulders
massive liability – and it's looking for someone to blame. Its team of corporate
lawyers decides the best strategy is to sue everyone who was involved in any capacity
with the email update – including you.
Even though you likely had nothing to do with the virus (and in fact, it was probably
the fault of a poorly trained employee of the mega-corporation), you're now on the
hook for presenting a legal defense for yourself. If you don't have an Errors &
Omissions policy in place, the cash for lawyers' bills will have to come out of
your pocket. Read more about the
6 Myths about Errors and Omissions Insurance.
The short answer is yes. E&O is a must for every IT professional. Errors and Omission
Insurance is typically bundled along with General Liability Insurance.
Your industry is growing rapidly, and typically evolves faster than legislation
and regulation can keep up. This means that an Errors and Omissions case against
your IT firm could involve uncharted legal territory, making a defense lawyer an
absolute necessity if and when you face E and O charges.
In truth, there are many reasons every IT specialist and tech company should purchase
this type of insurance. Here are some of the most important:
One important aspect of Errors and Omissions Insurance (also known as Professional
Indemnity Insurance) that all IT professionals should know about: this type of coverage
works on a “claims-made” basis. This means that, in order to receive benefits from
your insurance policy, it has to be active both when you file a claim and when the
incident related to the claim occurred.
In other words, if you start and stop E & O coverage with your individual contracts,
you likely won't have coverage when you need it most.
As an IT Professional, you could easily spend days hunting down less-expensive
Errors & Omissions Insurance policies online. And it is important to compare the
costs of several policies before making a decision. (You can do this by requesting
multiple E&O quotes from an insurance agent and comparing their benefits and costs
But remember: while it may be tempting to choose the policy that offers E and O
for less money each month, be sure to prioritize coverage over price. Saving money
on your E&O policy doesn't make sense if it means you'll have to pay out of pocket
in the event of an E and O claim against your business.
Ready to find an Errors and Omissions Insurance policy suited to the needs of your
firm? Contact a TechInsurance agent or fill out our simple online application, and we'll
send multiple policy quotes to your email inbox. Find out more about the
cost of errors and omissions insurance.
Figure out which insurance you need based on the language in your contracts.
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